Investors have their very own investing habits. Sometimes, they don’t even know they have it. And not all of these habits are good. Certainly, there are some bad habits they ought to remove from their system. The following are just some of those.
Buying High and Selling Low
Some investors tend to buy high, hoping to see the stock appreciate so they can sell higher. However, they usually end up selling low, particularly in times when the market is in bad shape.
They take a loss, which is something not everyone is fond of or tolerant about. But what’s even worse is that when the market shows some signs of recovery, these investors go back and re-purchase the stock.
Obviously, this goes against the golden rule of investing: buying low and selling high. It’s better to buy a stock now with good fundamentals and hold them for the longer term.
Letting Emotions Take the Wheel
Investing in the stock market is almost certainly a roller coaster ride for many investors. It plays with your mind and your heart. Unfortunately, many investors tend to let their emotions take the steering wheel.
Trading based on emotions only lead to financial losses. That’s because when you’re emotional, you’re also most likely to commit hasty, unwise decisions.
You have to remain calm and logical at all times. When you feel like you cannot do that, it’s best to veer away from the market for a time until you’re ready to make a rational, well-informed decision.
Being Too Scared to Lose
It’s perfectly reasonable to be scared of losing your money after you worked hard for it. But in the world of investing, it’s really a no-pain, no-gain system.
That simply means if you want to get bigger rewards, you must take on higher risks. That’s not to say you cannot earn if you’re risk intolerant. But the point is that you can’t expect to win the lottery without betting first.
But if you’re still too scared to invest—and to lose—you can start by using small amounts of money at first. You can always build your position when you see the trade is doing well. If you lose, at least you lose only a small portion of your capital.
Ignoring Portfolio Rebalancing and Asset Allocation
Another really bad habit by investors is foregoing portfolio rebalancing and asset allocation. After allocating funds at the start of their investing career, many investors fail to bring back the mix into its original allocation.
Remember that stocks’ performance change as they change their strategies, products, management, and even business model.
You should rebalance your portfolio to make sure that it still serves its original purpose.
Trading is the shorter-term form of investing. It’s a profitable venture if you know how to do it and how to do it right. However, many investors don’t know the art of this investing style.
And because of that, investors who try trading often end up going crazy about trading. Since online trading nowadays can be done with just one click, it’s easy to get addicted.
Overtrading can lead to strained mental facility for the trader. It can also cause losses and trading mistakes that would not be good for your portfolio in the longer term.